Strategies to Effectively Anticipate Anticipate and React to Currency News Kathy Lien Directors of Currency Research
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Agenda
Pro Proactiv tive vs. Rea Reacti ctive Trad rading
Learn How to Predict Economic Data
Proactive Trading
What is proactive trading all about?
Proactive Trading
Being ahead of the game. Benefits 1. Lower Risk 2. Instant Gratification 3. If You Are Wrong, You’re Out
Proactive Trading
Disadvantages: It’s difficult!
Proactive Trading
The Key: Trade Pure Event Risk Tier 1 vs. Tier 2 Data
Tier 1 vs. Tier 2 Economic Data AVOID •
Non-farm Payrolls
•
Central Bank Rate Decisions
• Anything without Forecasts
TRADE •
Retail Sales
•
CPI / PPI Numbers
•
Employment Numbers for Other Countries
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Tier 1 vs. Tier 2 Economic Data
Avoid Data From: Japan & Switzerland
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
How to Trade Proactively – Rule #1
Rule #1 Enter a position no longer than 20 minutes before a major news release.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Trading AUD Retail Sales 29 September, 2009 Australian Retail Sales s.a. (MoM) – Aug. 8:00 PM ET Expectations: 0.5% Previous: 1.00% Our Call: Stronger Retail Sales numbers
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Trading AUD Retail Sales
Source: DealBook® 360
How to Trade Proactively – Rule #2
Rule #2 Place stop at 30 pips.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Trading AUD Retail Sales
Source: DealBook® 360
Trading AUD Retail Sales
Source: FX360.com
How to Trade Proactively – Rule #3
Rule #3 Buy back ½ of the position when the currency sells off by the amount risked (30 pips), move stop on remaining position to break even. The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Trading Australian Retail Sales
Source: DealBook® 360
How to Trade Proactively – Rule #4
Rule #4 Trail stop on remaining position by 2 bar high, 3X risk or 20 SMA.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Trading Australian Retail Sales
How to Trade Proactively
Tricks of the Trade
How to Trade Proactively
Source: Bloomberg
Trading Canadian GDP
Canadian GDP (July) 30 September, 2009 8:30 AM ET 0.5% Expected 0.1% Previous
Trading Canadian GDP
Our View: Weaker Canadian GDP WHY?
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Anticipating News
What are the clues?
Leading Indicators for GDP Retail Sales and Trade
Source: FX360.com
Trading Canadian GDP
Source: FX360.com
Trading Canadian GDP
U.K. Employment Figures 16 September, 2009 5:00 AM ET (August Figures) U.K. Jobless Claim Change 25.0K Expected
24.9K Previous
ILO Unemployment Rate 8.00% Expected
7.80% Previous
U.K. Employment Figures
Our View: Stronger Labor Picture WHY?
U.K. Employment Figures
http://www.markiteconomics.com/MarkitFiles/Pages/PressCenter.aspx
Another Correlation IVEY PMI = Canadian Employment
Source: Bloomberg
Trading Canadian Employment
Source: IVEY http://iveypmi.uwo.ca/English/Welcomeeng.htm
U.K. Employment Figures
Source: FX360.com
U.K. Employment Figures
Anticipating News 24 September, 2009 U.S. Existing Home Sales (August) 10:00 AM ET Expectations: -2.70% Previous: 7.20% Our Call: Weaker Existing Home Sales
Trading U.S. Existing Home Sales
Our View: U.S. Existing Home Sales = WEAKER Risk Aversion Follows!!! WHY?
Anticipating News What are the clues?
Trading U.S. Existing Home Sales
Source: Bloomberg
Trading U.S. Existing Home Sales
Eurozone Data
German Trade and Current Account Balance (July) 8 September, 2009 2:00 AM ET
11.3B Trade / 10.0B CA
Expected
12.2B Trade / 13.3B CA
Previous
Trading German Trade Data
Our View: Trade and CA data = STRONGER WHY?
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Anticipating News
What are the clues?
Trading German Trade
• Leading Indicators for German Trade
• Manufacturing PMI Increased
Trading German Trade
Source:FX360.com
Trading German Trade Stronger than Expected
Source: FX360.com
Trading German Trade
Reactive Trading
Reactive Trading
Reactive Trading
The FX Market is HUGE. Prices do not adjust instantly.
Reactive Trading AUD/USD AUD Retail Sales - 29 September, 2009
Reactive Trading AUD/JPY AUD Retail Sales - 29 September, 2009
Reactive Trading AUD/NZD AUD Retail Sales - 29 September, 2009
Reactive Trading
What makes reactive trading so compelling? 1. No guessing of data. 2. Limited exposure to market risk.
Reactive Trading Reactive Trading Recipe for Potential Success
Reactive Trading 1. Understand the Calendar
Source: FX360.com
Reactive Trading 2. Know the Expectations
Source: FX360.com
Reactive Trading 3. Watch the Price Action
Source: DealBook® 360
Reactive Trading
Money Management: The Final Component
Reactive Trading
A reactive strategy requires swiftness.
How to Trade Reactively – Rule #1
Rule #1 Establish a bias from the data.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
How to Trade Reactively – Rule #2
Rule #2 Choose the currency pair to express the trade.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
How to Trade Reactively – Rule #3
Rule #3 Wait for technical confirmation on 5-minute chart.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Reactive Trading
30-point Stop 15-point T1 Target Trail Rest by 20
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
Reactive Trading
30 September, 2009 8:30 AM EST CAD – Gross Domestic Product 0.0% vs. 0.10%
Reactive Trading
Trade Idea: Long USD/CAD 1. Risk aversion! 2. Disappointing Canadian growth.
Reactive Trading
Source: FX360.com FX360.com and DealBook® DealBook® 360
Reactive Trading
Reactive Trading
Source: FX360.com and DealBook® 360
Reactive Trading
16 September, 2009 4:30 AM EST U.K. Jobless Claims Change 24.4K vs. 25.2K
Reactive Trading
Trade Idea: Long GBP/USD 1. Risk is ON! 2. U.K. Employment Looking Stronger
Reactive Trading
Reactive Trading
Source: FX360.com and DealBook® 360
Proactive/Reactive Trading
Proactive/Reactive Best of Both Worlds
Reactive Trading
1. Enter one lot 10 minutes before event. 2. If event confirms your thesis, add 2nd lot. 3. Move stop to B/E on the whole position. 4. Exit both when price reaches +15 in money on 2nd lot.
The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate
Proactive/Reactive Trading
Trade Idea: Long EUR/USD
Proactive/Reactive Trading Proactive/Reactive – Best of Both Worlds
Fast and Furious Trading
Fast and Furious Trading, Part 2
Agenda
What qualifies as short-term trading?
Trend vs. Countertrend
How to Trail
Trading Strategies
Improving Performance
Fast and Furious Trading
Short Term
Long Term
•
10 pips a day
•
100+ pips
•
20-30 round turns
•
Wider target, larger risks
•
Short attention span, low risk tolerance
•
Patience
•
Quality, not quantity
•
Quantity, not quality
•
60-minute charts or greater
•
5-15 minute charts
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